Important for stakeholder

Essay by strikerthomasUniversity, Bachelor'sB-, March 2004

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Executive Summary

It is important for SREC to recognize the mission and objective, as Sodor Railway Engineering Corporation Plc (SREC) has recently become privatization. The objective which is whether shareholder or stakeholder such as employees, government and customers interests should be taken account, is vital for financial decisions making to take place. The different group will bring SREC different outcomes or benefits.

I would suggest that SREC takes the shareholder into account when making decisions since SREC has recently privatized and needs shareholders' investment. This is also the way to keep SREC survive. Besides, as Rappaport A mentioned "European continent, there is increasing political tension between the shareholder value business practices required in a competitive global market and the long-standing tradition of social welfare." Therefore, shareholders are important to us. The main aim of setting shareholders as consideration to management process is to maximize shareholders' wealth. Significantly, we do not use accounting figures or ratios to measure the benefits to shareholders.

Shareholder theorists such as Milton Friedman argue that managers should serve the interests of a firm's owners - shareholders. They contend that the social obligations of the firm are limited to:

- making good on contracts

- obeying the law

- adhering to ordinary moral expectations

Briefly, "obligations to nonshareholders stand as sideconstraints on the pursuit of shareholder interests (Marcoux, 2000)."

Marcoux asks, in the Friedmn vein, "... why firms are obligated to give something back to those to whom they routinely give so much already. Rather than enslave their employees, firms typically pay them wages and benefits in return for their labor. Rather than steal from their customers, firms typically deliver goods and services in return for the revenues that customers provide. Rather than free ride on public provisions, firms typically pay taxes and obey the...